FATF AML Deficiency List
US Dept of State Money Laundering assessment
Non - Compliance with FATF 40 + 9 Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Offshore Finance Center (Labuan)
Malaysia is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Malaysia was undertaken by the Financial Action Task Force (FATF) in 2018. According to that Evaluation, Malaysia was deemed Compliant for 20 and Largely Compliant for 18 of the FATF 40 Recommendations.
APG Yearly Typologies Report - 2017
A substantial increase in STRs submissions is attributable to heightened transaction monitoring by reporting institutions; and increased awareness of money services operators. The main offences reported by reporting institutions were fraud/scam, tax evasion and bribery/corruption.
Some ongoing trends
Cash transactions remain the preferred methods for movement of illegal proceeds (receiving, transferring and spending).
Usage of 3rd parties’ account including mules account holders, for receiving and transferring the illegal proceeds of criminal activities.
The collection of funds for terrorism activities mostly for the financing of foreign terrorist fighters (FTF) rather than financing of the terrorist groups themselves.
The funds for FTFs are solicited via social media.
Usage of 3rd parties’ account including mules account holder, to receive on behalf or to transfers to FTFs.
US Department of State Money Laundering assessment (INCSR)
Malaysia is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes
Malaysia is a highly open, upper-middle income economy with exposure to a range of money laundering threats. The country’s porous land and sea borders, visa-free entry policy for nationals from over 160 countries, strategic geographic position, and well-developed financial system increase its vulnerability to domestic and transnational criminal activity, including fraud, corruption, drug trafficking, wildlife trafficking, smuggling, tax crimes, terrorism, and terrorism finance.
Malaysia has largely up-to-date AML legislation, well-developed policies, institutional frameworks, and implementation mechanisms. The country has shown continuing progress in efforts to improve AML enforcement by increasing money laundering investigations, prosecutions, and convictions. One key area for development is the prosecution of foreign sourced crimes.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 51
World Governance Indicator – Control of Corruption 63
Corruption in Malaysia is relatively low in comparison to the rest of East Asia. One of the main sectors subject to corruption is public procurement, with Malaysian companies sometimes being favored over foreign companies and with political connections still playing an important role in the outcome of public tenders. Anti-corruption laws are mainly contained within the Malaysian Anti-Corruption Commission Act, which covers a range of offences (including active and passive bribery, extortion and abuse of office) and penalties for private and public sector corruption. However, a lack of capacity and technical skills in some areas mean the level of enforcement is sometimes lacking. Local laws do not make an exception for facilitation payments, which should therefore be considered unlawful. For further information - GAN Integrity Business Anti-Corruption Portal
Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. Under current Prime Minister NAJIB, Malaysia is attempting to achieve high-income status by 2020 and to move farther up the value-added production chain by attracting investments in Islamic finance, high technology industries, biotechnology, and services. NAJIB's Economic Transformation Program is a series of projects and policy measures intended to accelerate the country's economic growth. The government has also taken steps to liberalize some services sub-sectors. Malaysia is vulnerable to a fall in world commodity prices or a general slowdown in global economic activity.
The NAJIB administration is continuing efforts to boost domestic demand and reduce the economy's dependence on exports. Nevertheless, exports - particularly of electronics, oil and gas, palm oil, and rubber - remain a significant driver of the economy. Gross exports of goods and services constitute more than 80% of GDP. The oil and gas sector supplied about 29% of government revenue in 2014. As an oil and gas exporter, Malaysia has previously profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined with sustained budget deficits, has forced Kuala Lumpur to begin to address fiscal shortfalls, through initial reductions in energy and sugar subsidies and the announcement of the 2015 implementation of a 6% goods and services tax. Falling global oil prices in the second half of 2014 have strained government finances, shrunk Malaysia’s current account surplus and put downward pressure on the ringgit. The government is trying to lessen its dependence on state oil producer Petronas.
Bank Negara Malaysia (the central bank) maintains healthy foreign exchange reserves; a well-developed regulatory regime has limited Malaysia's exposure to riskier financial instruments and the global financial crisis. In order to attract increased investment, NAJIB raised possible revisions to the special economic and social preferences accorded to ethnic Malays under the New Economic Policy of 1970, but retreated in 2013 after he encountered significant opposition from Malay nationalists and other vested interests. In September 2013 NAJIB launched the new Bumiputra Economic Empowerment Program, policies that favour and advance the economic condition of ethnic Malays.
Malaysia is a member of the 12-nation Trans-Pacific Partnership free trade agreement negotiations and, with the nine other ASEAN members, will form the ASEAN Economic Community in 2015.
Agriculture - products:
Peninsular Malaysia - palm oil, rubber, cocoa, rice; Sabah - palm oil, subsistence crops; rubber, timber; Sarawak - palm oil, rubber, timber; pepper
Peninsular Malaysia - rubber and oil palm processing and manufacturing, petroleum and natural gas, light manufacturing, pharmaceuticals, medical technology, electronics and semiconductors, timber processing; Sabah - logging, petroleum and natural gas production; Sarawak - agriculture processing, petroleum and natural gas production, logging
Exports - commodities:
semiconductors and electronic equipment, palm oil, petroleum and liquefied natural gas, wood and wood products, palm oil, rubber, textiles, chemicals, solar panels
Exports - partners:
Singapore 13.9%, China 13%, Japan 9.5%, US 9.4%, Thailand 5.7%, Hong Kong 4.7%, India 4.1% (2015)
Imports - commodities:
electronics, machinery, petroleum products, plastics, vehicles, iron and steel products, chemicals
Imports - partners:
China 18.8%, Singapore 12%, US 8.1%, Japan 7.8%, Thailand 6.1%, South Korea 4.5%, Indonesia 4.5% (2015)
Investment Climate - US State Department
The Government of Malaysia encourages foreign direct investment (FDI), although it maintains restrictions or limits on investment in some sectors. It actively reaches out to targeted industries and negotiates incentive packages to attract FDI. Malaysia provides a number of incentives, particularly in export-oriented high-tech industries and "back office" service operations. Prime Minister Najib Razak has made generating new domestic and foreign investment a centerpiece of his economic policies. Inbound FDI has been steady in nominal terms, and Malaysia’s performance in attracting FDI relative to both earlier decades and the rest of the Association of Southeast Asian Nations (ASEAN) has slowed.
According to the 2013 Organization for Economic Cooperation and Development (OECD) Investment Policy Review of Malaysia, FDI to Malaysia began to decline in 1992, and private investment overall started to slide in 1997 following the Asian financial crises. Since then, domestic demand has increasingly been the source of Malaysia’s economic performance, with foreign investment receding as a driver of GDP growth. The OECD concluded in its review that Malaysia’s FDI levels in recent years had reached record high levels in absolute terms, but have declined as percentage of GDP . A large share of FDI inflows involves reinvested earnings of existing foreign affiliates, suggesting that while established foreign investors remain committed to Malaysia, there are fewer new arrivals compared to earlier decades.
Malaysia’s attractiveness for FDI in low-wage manufacturing has diminished as years of steady economic growth have increased average wage levels making Malaysia an upper middle-income country as defined by the World Bank. The Malaysian Government seeks to promote investment in higher value-added manufacturing and service sectors. The National Economic Advisory Council (NEAC) regularly reviews and adjusts incentives to improve Malaysia’s competitiveness as a foreign investment destination to meet the country’s goal of becoming a high-income economy by 2020.
Prime Minister Najib’s 2009 Economic Transformation Program (ETP) encompassed policies and incentives for 12 key economic areas to accelerate growth: the Greater Kuala Lumpur/Klang Valley region; oil, gas and energy; palm oil and rubber; wholesale and retail operations; financial services; tourism; the electrical and electronics (E&E) sector; business services; communications content and infrastructure; education; agriculture; and health care. The ETP also targeted investment in resource-based industries and some services sub-sectors, including logistics, though these are also subject to foreign investment conditions or restrictions. Another initiative, the Government Transformation Program (GTP), addressed governance and quality of life issues, and aims to reduce corruption and crime, to improve education, urban public transport and rural basic infrastructure, and to reduce the number of low-income households.
In February 2016, Malaysia joined the other 11 negotiating partners to sign the Trans-Pacific Partnership (TPP), though it has yet to ratify the agreement. Once the TPP comes into force, the agreement will require participating nations, including Malaysia, to take various steps to facilitate investmentand improve market access: TPP eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services and covers the full spectrum of trade, including goods and services trade and investment.
The business climate has been conducive to U.S. investment. The largest U.S. investments are in the oil and gas sector, manufacturing, and financial services. Firms with significant investment in Malaysia’s oil and gas and petrochemical sectors include: ExxonMobil, Caltex, ConocoPhillips, Murphy Oil, Hess Oil, Halliburton, Dow Chemical and Eastman Chemicals. Major semiconductor manufacturers, including ON Semiconductor, Texas Instruments, Intel, and others have substantial operations in Malaysia, as do electronics manufacturers Western Digital, Honeywell, Haemonetics (medical devices), and Motorola. In recent years Malaysia has attracted significant investment in the production of solar panels, including from U.S. firms. Many of the major Japanese consumer electronics firms (Sony, Fuji, Panasonic, Matsushita, Hitachi, etc.) have facilities in Malaysia.
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